Nanex ~ 27-Mar-2015 ~ Rigged

Financial Word of the Year

Last updated: 14-Aug-2015

What do people mean when they say the Stock Market is rigged? Below is a definition along with many examples that would lead reasonable people to conclude that the market is rigged.

Definition

Rig

rigged, past tense of rig

1. Used to describe situations where unfair advantages are given to one side of a conflict.
2. Describes the side of a conflict that holds an unfair advantage.

Use in a Sentence

Despite costing taxpayers billions of dollars during the financial crisis, Wall Street decided to change nothing about the rigged market. In fact, Wall Street is known to have rigged the equity market, FX market, Libor, and the Commodities market since the financial crisis.

Examples

1. To falsely represent that a trading algorithm is capable of making decisions based on real time information.
2. To falsely represent that profiling of certain participants leads to the protection of investor orders on a particular venue.
3. To falsely represent that a broker’s router is unbiased in its treatment of all trading venues.
4. To falsely represent the extent to which an investor interacts with a type of market participant.
5. To falsely represent that certain participants have been removed from a venue.
6. To falsely represent the functionality of a venue to investors.
7. To knowingly allow select participants to enter orders on a venue in a manner that is in direct violation of US regulation.
8. To willfully ignore the possibility of a broker achieving a better execution outcome for an investor.
9. To willfully obstruct the quality of executions on a venue in a manner intended to improve the relative appearance of a brokers own venue.
10. To willfully send an order(s) to a venue(s) in a manner that would reasonably inhibit the probability of executing an order on a venue.
11. To willfully route investor orders to an offshore affiliate for the purposes of allowing the offshore affiliate to generate a profit via mark-up or mark-down.
12. To willfully route investor orders to an affiliate entity for the purposes of providing that affiliate entity with an opportunity to profit ahead of the execution of that investor order.
13. To willfully provide knowledge of unexecuted trading interest on a given venue to an independent routing facility of an affiliate or partner in a manner that gives that affiliate or partner an advantage over other participants.
14. To willfully notify a select group of participants of the unexecuted interest of an investor order in a manner that could be reasonably expected to negatively affect the economic outcome for that investor.
15. To willfully send investor orders to an intermediary, ahead of any interaction with other natural investors, and in a manner that could be reasonably expected to result in an inferior economic outcome relative to interaction with other natural investors.
16. To willfully send orders to a venue(s) for the purposes of achieving an economic benefit to a broker in a manner that could reasonably be expected to be detrimental to the economic outcome of an investor.
17. To willfully manipulate the opening or closing price of security.
18. To willfully allow the manipulation of the opening or closing price of one or more securities for a period of time in a manner where any reasonable person familiar with the arts would have identified that pattern of manipulation.
19. To willfully allow a 3rd party participant to utilize a function designed for use by a specific type of market participant on a venue; but is otherwise resold by that market participant to a 3rd party in a manner that provides that 3rd party an improved queue position on an exchange.
20. To willfully disseminate market data from a venue to a select group of participants at transmission speeds that could be reasonably expected to allow those participants to effect executions on the venue at outdated prices.
21. To willfully provide trading access to domestic or overseas participants without the provision of risk safeguards required to be in accordance with US regulation.
22. To willfully obfuscate the manner in which order types work in a regulatory filing while concurrently providing select participants a more comprehensive understanding of the functionality.
23. To willfully misrepresent the concentration of a select group of participants on a publicly traded exchange in an attempt to mislead investors from the potential revenue at risk as a result of any regulatory change affecting those participants.
24. To willfully provide a select group of participants with characteristics of investor order flow that would increase the probability of those participants interacting with a type of investor order in a manner where those participants would be expected to profit from that information.
25. To obstruct an investigation or expected investigation through the destruction of data that is otherwise required to be archived in accordance with the oversight and regulation of a trading venue.
26. To unreasonably prohibit certain participants from understanding or utilizing functionality on a venue that is otherwise available to select participants.
27. To purposefully expunge source code in a manner that would obstruct an investigation or an expected investigation into manipulative trading practices.
28. To willfully allow orders to be exclusively routed to intermediaries or to venues that cater to intermediaries while acting as a fiduciary.
29. To willingly classify (or reclassify) a proprietary trading unit as a bona fide market maker under US regulation by satisfying minimum requirement(s) of a legal statute, thereby allowing that trading unit to trade directly against investor order flow via non-negotiated or indirect methods of client facilitation, and often in a manner that is not in the best economic interest of the investor.
30. To operate an exchange and knowingly allow a market participant to effect manipulative trading patterns in a manner that could lead to significant destabilization of overall market prices and a loss of investor confidence.
31. To enter into an agreement on the basis of protecting investors only to breach that agreement by insisting that a select group of trading participants are allowed to "feast" on those same investor orders.
32. To knowingly operate an exchange or dark pool that uses technology that is slower than the fastest Members of the venue as it relates to recognizing and effecting obligatory price updates, price sliding, or order routing.
33. To collude with other market participants in anti-competitive ways intended to directly or indirectly undermine the potential for a new venue to be successful at gaining critical mass.
34. To willfully breach a contract with the intent to commit fraud by allowing HFT to "feast" on clients while arrogantly threatening any effort at legal recourse.
35. To publicly endorse a safer market structure during a period of heightened regulatory scrutiny followed by a reversion to illicit activities once such scrutiny has subsided.
36. For a Firm to unduly influence exchange officials and/or regulators following a sudden and material financial loss caused by a trading technology error and for regulators and exchange officials to be unduly influenced in a manner that results in preferential ruling(s) that exonerate the Firm from incurring the full magnitude of the financial loss.
37. To willfully route a brokers customer orders to a dark pool comprised of a high concentration of HFT and proprietary trading contra party interest with a reasonable expectation that any execution in that dark pool will lead to a higher probability of canceled liquidity at any subsequent venue destination(s).
38. To willfully create the appearance of liquidity in a highly liquid Treasury market through a high percentage of wash sale transaction and for an exchange and regulatory authority to be complicit in the identification and action against such illegitimate wash sale activity.
39. To operate as a U.S. Exchange and offer a routing product that directs orders to undisclosed "low cost partners and non-NMS protected venues" operated by the largest customers of the Exchange.
40. To participate in the decision to modify the name or acronym of a category of destabilizing market participant to create the perception that the category is not involved in market manipulation.
41. To market a publicly traded broker as "agency-only" while establishing a Board-approved proprietary trading group that utilizes open investor orders as the basis for a front-running trading strategy.
42. To willfully publish a "transaction size" that is knowingly and materially inaccurate and therefore inconsistent with just and equitable principles of trade so as to create the appearance of better execution quality than all other exchanges.
43. To willfully ignore publicly available evidence that demonstrates how a type of market participant ("HFT") can profit at the expense of an investor or fiduciary whenever orders are routed to a particular market center (dark pool or exchange) as part of a wave of concurrently routed orders and in a manner in which the execution report or resulting data from some market centers will be received by HFT and used to trade ahead of any of the aforementioned concurrently routed orders.
44. To willfully ignore publicly available evidence and actual trading results, while acting in the capacity of broker, that demonstrates how a type of market participant ("HFT") may profit at the expense of that broker's customer whenever routing a series of concurrent orders on behalf of that customer to the brokers own dark pool or other market centers (dark pool, wholesaler, exchange) as part of a wave of concurrently routed orders and in a manner in which the execution report or resulting data from any market centers will be received by HFT and used to trade ahead of that customers concurrently routed orders.
45. To act as a Fiduciary and knowingly allow orders to be executed in a venue that allows faster participants to trade against pegged orders at outdated prices, thereby resulting in economic harm to the beneficial owner(s) of those executions.
46. To act as a Fiduciary and knowingly allow orders to be traded on an exchange that offers tiered access to speed involving order entry, execution, and market data, resulting in economic harm to the beneficial owner(s) of those executions.
47. To be employed in the field of financial journalism and to allow capitalist interests to compromise the integrity of reporting due to conflicts of interest including compensation, implicit or explicit endorsements or forms of remuneration, reciprocal arrangements, advertisement, paid attendance or sponsorship at a media sponsored event, etc.
48. To knowingly operate an exchange self regulatory organizational (SRO) that creates multiple tiers of access that result in economic harm to certain members of that SRO, for the purposes of generating a profit for the SRO through a commercial operation.
49. To operate as a Fiduciary while being aware of the consequences of the current market structure and the manner in which it could cause economic harm to the beneficial owner, yet do to not effect the necessary changes sufficient to eliminate the economic harm.
50. To be employed by an agency established by an Act of the U.S. Congress with knowledge that the prevailing rules created by that Agency have enabled a national market system that does not achieve the principal objectives of the Agency itself; to protect investors and to maintain fair and orderly markets; to not have a willingness or mandate to eliminate any such rules that clearly run contra to the Agency's objectives.